Cash flow is a finance term that gets thrown around in business, but you can apply the same concept to help you achieve your personal financial goals.

And if you’re already tracking your spending, you’re only a step away from the bigger insights you’ll get from tracking cash flow.

Why should you track your cash flow?

Cash flow is a simple metric for understanding your financial big picture. Consider it a starting point, whether you’re actively budgeting or not.

Tracking cash flow will give you ongoing guideposts so you’ll know when it’s time to reassess your spending, saving, or take some other action to improve your finances.

What is cash flow?

At the basic level, cash flow is the amount of money coming in and going out of your accounts during a set period of time.

You can build a personal cash flow statement by tracking your inflows (like salary, side hustle income, etc.) and outflows (bills, debt payments, regular savings contributions, other spending, etc).

Subtract your outflows from your inflows to see if you have money left over or if you’re spending more than you’ve earned– that’s your net cash flow.

Tiller makes this calculation easy by pulling all your spending and earning data from all of your accounts into a single place. Some of our financial spreadsheet templates even include built-in cash flow calculations.

How is tracking cash flow different than tracking spending?

When tracking spending, you focus purely on outflows, or the money depleting your accounts. You may be using a budget or maybe you’re just setting a particular target for your spending. Tracking cash flow is a strategic level up because it provides a holistic view of your financial patterns. Then you can see opportunities for positive change.

Since tracking cash flow is about understanding the relationship between your inflows and outflows, you’ll be able to make better strategic choices for your money over the next pay period, year, and even begin to see opportunities for the long-term.

Where does cash flow fit into the financial journey and what does it tell me?

Knowing your cash flow position clues you into the right next steps for your finances.

If you’re earning more money than you spend, your cash flow is positive or you’re operating at a surplus. When you see a pattern of positive cash flow, that means you have the flexibility to make decisions about what’s best for your extra money.

So what’s the next step if you’ve got a surplus?

Act strategically. Maybe you adopt a more forward-looking perspective to help you plan for big expenses or bulk up your savings rate. For many of us, ‘capturing’ this surplus is key to accelerating progress toward our goals. It puts you in position to increase your net worth, grow your wealth, or simply invest in your life in the way that seems right for you.

What can you do to turn negative cash flow around?

If you’re seeing a pattern of negative cash flow month after month, it’s a reality check to reevaluate your outflows. Can your income support your level of spending and savings? Are you living beyond your means? At its core, negative cash flow is a sign that it’s time for a change.

Maybe increasing your income is the easiest way to improve your cash flow. Maybe it’s time to get serious about sticking to a budget (link to budget articles). Finding a way to change the pattern of negative cash flow is key to set yourself up for future success.

Using Tiller or any other tool to track your cash flow is the first step. When you have clarity about where you stand, you’re empowered with the information you need to make a confident change and ultimately gain control of your financial future.

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